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20 January, 02:43

On January 1, 2018 , White Corporation signed a $ 120,000 , four -year, 2 % note. The loan required White to make payments annually on December 31 of $ 30,000 principal plus interest.

Required:

a. Journalize the issuance of the note on January 1, 2018

b. Journalize the first payment on December 31, 2018

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Answers (1)
  1. 20 January, 06:36
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    Dr cash $120,000

    Cr Notes payable $120,000

    Dr interest expense $2,400

    Dr notes payable $30,000

    Cr cash $32,400

    Explanation:

    The issuance of the notes payable of $120,000 means that White Corporation's cash inflow has increased by $120,000 while its corresponding loan obligation has also gone up by the same amount.

    On 31 December 2018, White Corporation would need to repay $30,000 principal plus interest of $2,400 ($120,000*2%). The interest payment is debited to interest expense while $30,000 repayment is debited to notes payable and cash is credited with the total of $32,400
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Home » Business » On January 1, 2018 , White Corporation signed a $ 120,000 , four -year, 2 % note. The loan required White to make payments annually on December 31 of $ 30,000 principal plus interest. Required: a.
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